Arbitrate, Mediate, or Litigate?
You are about to embark on a new construction project, hoping for the best but preparing for the worst. The construction contract is almost done. At issue is what the contract should state about how disputes among the parties should be resolved; should they be arbitrated, mediated, or litigated? (If nothing is stated the default is generally litigation.) Each of these methods of dispute resolution has its own unique characteristics.
Arbitration: Arbitrations are typically not matters of public record. A contract calling for arbitration may provide that the arbitration proceedings are to be kept confidential. Although the American Arbitration Association has rules governing arbitration in construction disputes, the normal rules of evidence typically do not apply. There is no judge or jury. Rather, and depending upon the case or the parties’ agreement, one to three arbitrators will decide the dispute. The arbitrator(s) will typically have experience in the construction field, unlike perhaps a judge or jury.
Some view arbitration as less expensive and providing for a relatively faster resolution of a dispute; not always so. Discovery is not typically allowed in an arbitration proceeding [if allowed it is typically limited], so any arbitration testimony might take longer than might otherwise be if pre-arbitration discovery were taken.
There is also a more limited right to challenge an arbitration proceeding. For example, in Florida the right to modify an arbitration award can exist where (a) there is an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the arbitration award, (b) the arbitrator(s) rendered an award upon a matter that was not submitted to them, or(c) the award is imperfect as a matter of law, not affecting the merits of the controversy. Fla, Stat. § 682.14.
Mediation: Mediation can also be a cost effective means to resolve a construction dispute. Some construction contracts provide that the parties shall consider mediation, whereas other contracts make mediation a condition precedent to filing a lawsuit. The mediator is usually someone who is well versed in construction. The actual mediation process may take a day or so, depending upon the complexity of the issues. Mediation is generally not binding unless the parties reach a settlement. At times, a party may, however, believe it needs certain information in order to effectively mediate a matter. Pre-suit mediations may not allow for a full opportunity to present one’s case. Also, a party may be concerned about tipping its hand; wanting to lock in the other side to a position before exploring settlement through mediation. On the other hand, mediation may enlighten everyone as to the basis for the parties’ positions in an expedited inexpensive manner without the need for tedious time consuming discovery.
Litigation: Finally, there is litigation. Under this approach the parties can have a judge or jury decide the case. The court is bound to follow the substantive law that applies to the case. Rules of evidence apply. Those who testify are, of course, required to tell the truth. Discovery is allowed. The parties proceed through the structured judicial process, taking depositions, serving interrogatories and requests for production upon each other, conducting site inspections, retaining experts, and otherwise going through the formal court proceedings. The right to appeal, on a broader basis than in arbitration, exists as well. Litigation can be expensive too, but you will have “your day in court.” (In Florida, courts may also require the litigants to participate in arbitration or litigation as part of the pretrial process. Chapter 44, Florida Statutes)
Conclusion: There is not per se a “one size fits all” approach to the best method of dispute resolution. Instead, consideration should be given to what works best in your particular case.